Creating Shared Value at Nestl

Creating Shared Value has always been the core of who we are at Nestl. Creating Shared Value played an integral role at the inception of our company. Influenced by the high infant mortality rate in mid 19th century Switzerland, our founder, Henri Nestl, developed the first cereal milk. His invention enabled him to save the life of his neighbor s child. From that single product, he founded what was to become the largest food and beverage company in the world. Today, more than 140 years later, Nestl creates value through its basic business activity not only for its shareholders but also for the societies in which it operates. We make long-term investments that benefit both our business and our public because we recognize the inherent interdependence of both. We call this Creating Shared Value (CSV). Creating Shared Value means making a positive impact upon the quality of life of the communities we serve; our employees and their families; and our suppliers while also giving value back to our shareholders. We Create Shared Value in three key areas: Nutrition, Water and Rural Development. At Nestl Philippines: We strive to make nutritious foods and beverages more accessible and affordable to Filipinos while informing them about the importance of proper nutrition, health and wellness. We help coffee farmers improve their yields while providing barangays with livelihood skills and other opportunities. We reduce, reuse and recycle our resources, optimizing both water and energy usage in our factories. Nestl Philippines is committed to constantly creating shared value among Filipinos through sustainable programs and in so doing to help nurture future generations of Filipino families as we have been doing for the last 99 years.
JOHN MILLER Chairman & CEO Nestl Philippines, Inc.

Nutrition
Creating access to nutritious products and promoting nutrition education
We strive to make nutritious food and beverages more accessible and affordable to Filipinos while informing them about the importance of proper nutrition, health and wellness John Martin Miller, Chairman & CEO, Nestl Philippines, Inc.

Laki Sa Gatas Nestl's commitment to promoting healthy dietary habits is supported by educational awareness campaigns that aim to give people a better grasp of what good nutrition is and its importance for the achievement of good health and overall wellness. Launched in 2006, the LAKI SA GATAS initiative aims to educate Philippine public school communities on the value of healthy nutrition and the importance of drinking milk. More than just being educational, this advocacy at its very core seeks to empower public school kids, mums, teachers and educators alike that through balanced health and education realising ones dreams and ambitions are possible. LAKI SA GATAS, loosely translated as Growing Up with Milk, was born out of the reality of low milk consumption and the increasing number of prevalent cases of malnutrition amongst Filipino children in the lower socio-economic classes. Now on its 4th year, the LAKI SA GATAS advocacy has visited over 2,700 schools across the country and has reached out to more than 1,7 million school children, over half-a-million mothers and nearly 40,000 educators. This year the advocacy is stronger than ever rolling out to more public school communities with new and exciting innovations that seek to further engage advocacy participants. As each LAKI SA GATAS session in a school has 3 major event components kids, mums and teachers sessionsall components this school year have been prepared to be more educational, fun, and engaging. In the Childrens Session, grades 2 and 3 pupils are treated to fun and learning activities to help them understand healthy nutrition. They are likewise entertained by BEAR BRAND Powdered Milk Drink mascots, Mama Bear and Kuya Bear (big brother bear). The highlight of this session is to encourage children's ambitions. They are given blank paper where they can draw the ambitions they would want to pursue when they grow up. The drawings will serve as a reminder that a healthy mind and body can help them achieve their dreams.

In the Mothers Session, the participants are lectured on how to prepare healthy and affordable meals for their families. Mothers are also encouraged to serve their children milk everyday as a means to help give their children the nutrition they need to help them perform well in school. Educators, meanwhile, are trained on how to address malnutrition in their classes during the Teachers Session. They are given tips on how to make teaching healthy nutrition more fun and engaging for children.

Through this programme, we hope to reestablish the value of milk and its vital role and importance for the health of Filipino families across the country.

Nestl Healthy Kids Program Towards a Healthier future, 40 Kids at a Time Some 25.6% of Filipino children, 6-10 years of age, are found to be underweight, according to the 6th National Nutrition Survey of the Food and Nutrition Research Institute (FNRI). As part of Nestl's mission to nurture generations of Filipino families, the Corporate Affairs Department of Nestl Philippines, together with the Rotary Club of Caloocan, Business Team Nutrition Management System, Inc., NGOs and Local Government Units pooled their resources to start a 90-day nutrition program for 40 malnourished children aged 7-12 at the Libis Talisay Elementary School in Caloocan. Aptly called the Nestl Healthy Kids Program, the feeding program is designed to bring nutrition into the lives of severely malnourished children. The program provides supplementary daily feeding for 90 days. Both the children and their parents go through basic nutrition education -- for children so that they become aware of the importance of eating nutritious food early on and for parents so they will realize that nutrition need not be expensive and that they can better nourish their kids with the right food and beverage choices. As economics is a critical factor in malnutrition, the program also provides the parents with livelihood opportunities so that they earn extra income to help support their families.

The livelihood strategy links them up with our other Nestl livelihood programs such as the Business on Wheels program and the MicroDistributor program and offers these as an opportunity for the families to support themselves. And finally, to ensure the consistent supply of food for the school, Nestl also supports the construction of a school garden consisting of basic vegetables that they can grow within school premises. With the help of the Nestl Healthy Kids Program, which encompasses daily nutrition, nutrition education, effective weight monitoring, parent education, livelihood opportunities as well as school garden initiatives, Nestl hopes to be able to make a positive difference in the lives of 40 kids at a time. The Program, which is part of the Nestl Global Healthy Kids Programme set up by Nestl S.A. in Vevey, will be scaled up in time to reach communities and public schools located near the Nestl factories in the Philippines

Water and Environmental Sustainability

Optimizing water management and advocating the responsible use of scarce resources
We reduce, reuse and recycle our resources, optimizing both water and energy usage in our factories. John Martin Miller, Chairman & CEO, Nestl Philippines, Inc. Waste Water Treatment Plants Showcasing the Companys reverence for water are the world-class wastewater treatment plants operating in all its factories. Manned by highly competent personnel, these treatment plants capture every drop of wastewater discharged from the factories, cleanse the water of impurities, and release it to natural waterways clean enough to sustain marine life. Treated water from Nestl factories is constantly tested and is known to meet, and often exceed, strict government standards. The Company has likewise explored several areas where water can be further optimized, leading to the reuse of sealing water from vacuum pumps, cooling water from MILO processing, rinsing water, and recovered water from reverse osmosis plants.

These initiatives, coupled with simple techniques as the use of sensor-operated faucets that ensure automatic stoppage of water flow, have cut down water consumption throughout Nestl by about 16% since 1997, or an average of 65,500 cubic meters of water every year.

Treating and Reusing Water The wastewater treatment facilities of Nestl factories showcase how water can be treated and reused, and demonstrates the importance the Company gives to water. In these factories, treated waste water is used to sustain life forms, from watering the gardens in the premises, to propagating Koi fish and tilapia, serving as a constant reminder to employees and guests about the life-giving value of water.

Agriculture and Rural Development

Developing rural areas and communities by aiding farmers, facilitating indirect and direct employment and continued infrastructure development

We help coffee farmers improve their yields while providing barangays with livelihood skills and other opportunities - John Martin Miller, Chairman & CEO, Nestl Philippines, Inc. SUSTAINABLE COFFEE FARMING TRAINING PROGRAM Coffee farmers are Nestls fundamental partners in producing coffee products of the highest possible quality for Filipino consumers. Knowing this, the Company pursues an agronomy program aimed at helping farmers improve both the quality and quantity of their coffee yield. At the center of this program is the Nestl Experimental and Demonstration Farm (NEDF) in Tagum City, Davao del Norte, which was built in 1994 to serve as the hub of the Companys agricultural research and training activities. The Nestl agronomy program helps farmers in four ways: Providing access to farming technological advances. Nestl agronomists continually conduct trials and experiments at the NEDF to discover and develop better techniques of growing coffee. Continuing research allows Nestl to equip farmers with scientific tools for adapting to changing agricultural conditions or new

methods that have been pre-tested and shown to generate positive gains. The NEDF also develops and propagates planting materials such as coffee seeds, rooted cuttings, and ready-to-plant seedlings, which are made available to interested farmers at cost. To date, it has provided farmers some 17,000 kilograms of coffee seeds, a million coffee seedlings, and nearly a million rooted cuttings. Training. For effective transfer of technical know-how, the Company offers three kinds of training: a three-day basic seminar, which is open to any one who wants to learn about coffeegrowing; a three-week advanced course, for coffee specialists and technicians from government agencies, NGOs, and LGUs that provide assistance to farmers; and on-site training for farmers to help them improve their coffee farming methods. Since 1996, Nestl has trained more than 6,000 farmers, coffee specialists, technicians, and students on coffee growing. Promoting sustainable practices. Nestl has developed a coffee-based sustainable farming system that allows farmers to plant other crops in between rows of coffee trees and enable them to earn additional income. This is in line with the Sustainable Agriculture Initiative of Nestl (SAIN), a worldwide advocacy for making coffee farming feasible and sustainable. For more information on growing coffee, email us at coffeegrower@ph.nestle.com CUT AND SEW, YARD AND GARDEN One project stands out in the barangays for having provided a steady source of income to formerly unemployed residents the Cut and Sew. In Barangay Bagong Pook where the Nestl Lipa Factory is situated, this project has become a cottage-industry type of enterprise that generates as much as PhP 1.5 million worth of business every year for residents. Here, residents make use of their sewing skills to supply the factorys requirements for uniforms (pants and polo jackets), laboratory gowns, hairnets, shoe covers, and rags. Cut and Sew was launched in 1997 as a simple outreach project that organized a group of interested barangay ladies to learn how to sew under a TESDA training course. Armed with their newly acquired skill and provided with seed money to buy equipment and materials, the ladies began by doing small sewing jobs for the factory. In just two years, the group expanded and evolved into a more organized enterprise, with a

community leader overseeing the operations and transacting business with the factory. The group has since become the sole supplier of sewing services to the factory. Another noteworthy livelihood activity for Barangay Bagong Pook housewives is the Yard and Garden project of the Nestl Lipa Factory, which involves cut flower Product on and organic vegetable farming in a plot of land within the premises of the factory. Here, the ladies grow vegetables and ornamental plants. With the factory giving financial assistance, planting materials, and relevant training, the Yard and Garden members take full charge of the operation of the garden and sell all their produce to the factory canteen and employees. They also rent out the ornamental plants to the factory. They use the earnings to pay for their operational expenses, including remuneration of those involved in the project.

BOWERS, MICO-D, ICE CREAM CARRITOS Expanding its reach beyond barangays, Nestl has developed a platform where it provides livelihood to thousands of otherwise unemployed citizens throughout the country. This is in the distribution and selling of its products under the MicroDistributorship (MD) Program, which provides able-bodied individuals who are at least high school graduates with an opportunity to become small-scale entrepreneurs by selling Nestl products to sari-sari stores. Under the Program, these fledgling entrepreneurs personally distribute and sell Nestl products to small stores in densely populated areas that can not be covered by existing Nestl distributors. A similar program runs in two other business units of the Company Ice Cream and Nestl Professional. In Ice Cream, the Program provides livelihood to commissioned street vendors who ply the streets of residential subdivisions and other high-traffic public areas to sell the range of NESTL Ice Cream products categorized as impulse, the kind that consumers are known to crave for on a whim. In Nestl Professional, livelihood comes through its Business on Wheels (BOW) Program, where members earn by selling Nestl products to small carinderias. In all three programs, the peddlers are trained on the proper way of selling, product knowledge, and the mechanics of the program they are in. They are equipped with Nestl-branded motorized cabs and uniforms, and assigned to certain territories to tap and develop their accounts. They get their stocks of Nestl products from Nestl distributors, enjoy a certain discount on distributor rates, and are allowed to mark up

their price by a certain percentage. On any regular day, these enterprising peddlers earn a net income higher than the daily minimum wage, with the chance to earn more well within their capacity.

GAWAD KALINGA The Companys flagship project for the less-fortunate is its involvement in Gawad Kalinga (GK), the balikatan inspired housing program initiated by an NGO. Casting its support in 2003, Nestl helped build houses in Baseco for about 40 families who had lost their homes to fire, and adopted 14 more families to bring to 54 the total number of homes it has so far sponsored. Seeing the positive impact of the Companys first Gawad Kalinga (GK) venture, Nestl Philippines has pledged to sponsor more GK villages until 2010, starting with 50 homes in Lipa and another 50 in Cagayan de Oro. Beyond merely building houses, Nestl intends to incorporate nutrition, water conservation, and community development in every GK village it develops. The GK village in Lipa is envisioned to become an ecovillage showcasing environmentally sound practices. It is equipped with a rainwater catchment system that will allow recycling of rainwater. The village uses of reed bed technology, which processes sewage by natural reed system without the use of chemicals.